Be Careful What You Ask For

question chromeDo You Really Know What That Managed Fund Is Trying To Achieve?

If you invest $1,000 in a managed fund whose aim is to beat an index, that is what you can expect it's managers to try and achieve. That means that when the index goes up you should expect the value of your fund to go up by more, and when the index goes down the value should go down by less.

  • If the index goes up one year by 10% and the fund goes up by 11% - to $1,110 - the manager will have outperformed the index and achieved the funds objective.
  • If the index then goes down the next year by 20% but the fund only goes down by 18% - to $910 - the manager has again outperfomed the index and achieved the funds objective.
  • The value of your funds is nearly 9% less than what you started with but the manager has achieved the funds objectives, you are better off than if you'd invested in the index by about $30

You cannot complain that the manager hasn't done its job because it has done exactly what it said it would do. It is weird when you see a fund manager claiming great fund performance when they've lost a whole lot of money but as they've beaten their index they can.

Be sure that you understand what the fund you are invested in is designed to do and that is indeed what you require. There are a whole range of Managed Funds with different investment approaches. Be sure that the one you are in is doing what you want it to do.

There are funds whose objective is to increase the value of your investment - no matter what, but perhaps surprisingly not all do.

If your unsure of exactly what the fund you are in is designed to do and would like to discuss please call Andrew or Jonathan at Bay Financial Partners on 07 578 3863.

  • Last updated on .

The information on this site is intended as a guide only. The information is of a general nature and does not and cannot ever constitute personal advice.
© Copyright 2009-2017 Bay Financial Partners Limited |  All Rights Reserved.